Investing oil revenues in economic and social development, prioritizing oil refinery, ensures prosperity

Jan 26, 2020 Consumer Concerns, News

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CONSUMER CONCERNS

By PAT DIAL

When it was known towards the closing months of last year that Guyana would be an oil and gas producing country, economists and others began to think how the oil revenues should be spent. There were simplistic suggestions of sharing the oil revenues among the population, immediately allocating one million dollars to every person in Guyana.
There were more sophisticated suggestions of establishing a Sovereign Wealth Fund to which the revenues would be transferred to be used on various national programmes which required funding. There are many models of Sovereign Wealth Funds and the one chosen by the Ministry of Finance, as expected in such choices, would not be universally accepted.
The business organizations and individual business persons have their own ideas of the structure, framework and activity of the Fund. In addition, there is a very slowly growing feeling among the population that oil is the panacea and that all would be inundated by unlimited wealth. This article will try to exorcise this unrealism.
Fortunately, there are a number of able businessmen and other intellectuals who have been publicly giving competent advice on oil revenues.
One of the first such persons was Komal Samaroo, Chairman of Demerara Distillers Ltd, who while addressing the Georgetown Chamber of Commerce and Industry, pointed out two important characteristics of the Oil Industry.
Firstly, that Oil is a commodity like any other and is subject to the vagaries of the international market — it may sometimes have to be sold at very low prices or even at a loss. And secondly, Oil is not a naturally renewable resource like Agriculture and will at sometime be exhausted.
Trinidad is suffering this syndrome as its oil resources are contracting and its economy is beginning to be negatively affected. He therefore emphatically recommended that oil revenues be methodically invested in social and economic developments such as Education, Agriculture, agro-industries, industries to produce consumer goods which would be self-generating.
President Granger while addressing a group of young people at Linden on the occasion of welcoming the first oil production, had a similar message as Mr Samaroo: “All around the world people are moving away from petroleum and you better learn that lesson that petroleum, whatever bonanza, whatever profit, whatever revenues we get, will not last forever.
So we have to put in place the type of development that would take us beyond petroleum. . . the youth would be provided with the right tools to ensure that Guyana does not become heavily dependent on the petroleum sector. . .
Even some of the most productive petroleum countries now have the most successful solar energy generation plants. Some of the countries producing the most petroleum are also producing the most electricity from solar power.
The President thinks that the priority investment should be made in Education and Training which would assist young people to become economically empowered. They would be involved in agro-processing, agro-culture, apiculture, aquaculture, business outsourcing, cultural industries and eco-tourism among other industries.
Some people have been regarding the oil discovery as the source of a never-ending flow of wealth to be consumed. Fortunately, most Guyanese are regarding the oil wealth in a mature way as capital to invest in the numerous projects which have been crying out for capital investment over the last century.
If the oil revenues are regarded in this way, its mystique disappears, since it would be only adequate to fully capitalize the various social and economic projects which would raise the standards and levels of Education, Health, Housing, profits, wages and employment.
If this message is consistently given to the Guyanese people by the media, political leaders, intellectuals, the education system and other makers of public opinion and is acted upon, then the oil industry would be a true blessing.
Among the first investments that have to be made is to build an oil refinery and a port that could accommodate tankers. These two value-added projects would absorb a great deal of the oil revenues but would be generating more wealth from employment, high wages and profits than if the revenues were used to provide immediate satisfaction.
Other sectors in which profitable investments could be made include Agriculture – Sugar, Rice, fruit, fish-farming and value-added agro-industries.
Infrastructure – Roads, railway to Interior, river bridges, ferry services.
Green Power – Solar Power and Hydropower.
Social Services – Education: better pay for teachers, upgrading of all educational institutions, raising levels of the University of Guyana, technical and IT training. Housing- increasing momentum and quality of houses and land on offer. Hospital – Specialty Hospitals, upgrading of all hospitals and health services. Industrialization – production of consumer goods for local and export usage. Developmental Bank- lending established Private Sector and start-up entrepreneurs.
Once the political and intellectual leaders ensure that the revenues are quickly channeled into developmental projects and the education system and media educate and inform the population of the value of such an approach to the employment of oil revenues, Guyana would be a country in growing and permanent prosperity.

 

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